Introduction
Perspectives
A visionary
management model
Hubert K. Rampersad
The author
Hubert K. Rampersad is an International Consultant,
METEM Consulting, Zoetermeer , The Netherlands.
Keywords
Strategic management, TQM, Organizational change
Abstract
Visionary management is a key issue for all organizations.
It is a never-ending journey toward competitive
advantage. By making visionary thinking a part of your
daily routine, you will integrate it into all aspects of your
work. This should become your organization’s way of life.
This article introduces a visionary management model,
based on an ambiguous mission, vision, core values,
smart goals, strategies, critical success factors, and
related performance indicators. It is based on the most
recent book of the author.
Electronic access
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The TQM Magazine
Volume 13 . Number 4 . 2001 . pp. 211±223
# MCB University Press . ISSN 0954-478X
Visionary management is both a philosophy
and a set of guidelines that form the basis for a
never-ending journey toward competitive
advantage, whereby planning of strategic
activities, implementation of these plans, and
undertaking actions, is continuously taking
place. The modern strategic management
models in this paper include a common
method to improve the entire organization in
a step-by-step, structured and systematic
manner, and is also related to the continuous
and gradual improvement of all employees at
all levels of the organization, in order to
improve their personal output on a daily basis.
They provide a framework within which you
may continuously and routinely improve
everything you do, in order to better meet
internal and external customer needs, and to
continuously increase customer satisfaction.
By systematically and routinely working
according to this concept in everything you do
within your organization, you will be able to
add increased value for internal and external
customers and continually satisfy them.
Visionary management process
The visionary management process starts with
a three-day workshop, in which all managers
get the opportunity to formulate their own
personal mission, vision, and key roles of their
lives. Expand this process to development of a
common mission, vision, and core values of
the whole organization. These common
organizational mission, vision, and core
values form the basis for developing the
objectives, strategies, critical success factors,
and performance indicators of the company
(see Figures 1 and 2). Next, balance your
personal mission, vision, and key roles with
the organizational mission, vision, and core
values. In other words:
The author is an international consultant in the
field of Total Quality Management and Strategic
Management. This article is based on his most
recent book Total Quality Management; An
Executive Guide to Continuous Improvement,
Springer-Verlag, Heidelberg, January 2001 (ISBN
3-540-67967-7). He can be contacted by e-mail at:
hubert_rampersad@hotmail.com For additional
information see his home-page: http://www.sr.net/
users/rampersa/
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Figure 1 Visionary management model
Figure 2 Stakeholders
Personal (<mission>, <vision>, <key roles>)
Organizational (<mission>, <vision>, <core
values>).
The following questions are important here:
Are your personal mission, vision, and key
roles represented in the organizational
mission, vision, and core values? If not,
should your personal mission, vision, and key
roles be adjusted or expanded? Are they
acceptable? How can they be developed in the
organization? Are you prepared to look for
another organization where these have a
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higher priority? The development of the
personal and organizational mission, vision,
and roles/values does not only take place at
the management level, but at all lower
organizational levels in a series of meetings.
Everyone in the organization needs to be
actively involved in this top-down and
bottom-up process (Senge, 1990).
Personal mission, vision, and key roles
Each employee has to formulate his/her own
personal mission, vision, and key roles.
Formulate these elements in a positive and
current manner, as if everything happens at
this present moment. Your personal mission
statement encompasses your life philosophy
and says who you are, what your life goals are,
why you live, and what your deepest
aspirations are. Your personal vision statement
is a description of where you are going, which
values and principles guide you to reach that
point, what you want to help realize in your
life, what ideal characteristics you would like
to have, and what your ideal profession, living
and health conditions are. Your key roles
regard the way you fulfill or want to fulfill
several roles in your life to realize your
personal mission, such as the role of a father,
mother, friend, manager, neighbor, etc. In
other words, the relationships you would like
to have with your friends, family, neighbors,
and others. According to Covey (1993), the
whole of these three elements is sort of a
constitution, which guides your life, and
forms the basis to evaluate decisions, what
you want to be, and what you want to do. The
way this is formulated stimulates you to think
deeply about your life, and gives meaning to
everything you do. It helps you to discover
your innermost feelings and clarifies what is
important to you. You can eventually rewrite
these in case your living conditions or
thinking patterns change in the course of
several years. You can get an idea of your
personal mission, vision, and key roles if you
answer the following two questions: What
would you like to have written on your
tombstone? Which memories would you like
to leave behind when you pass on? The
following is an example of an effectively
formulated personal mission, vision and key
roles of a manager. This example is derived
from the recommended book The Seven
Habits of Highly Effective People, by Covey
(1993).
(1) Personal mission: my mission is to live with
integrity and to make a difference in the
lives of others.
(2) Personal vision: to fulfill this mission:
.
I have charity: I seek out and love the
one – each one – regardless of his
situation.
.
I sacrifice: I devote my time, talents,
and resources to my mission.
.
I inspire: I teach by example that we
are all children of a loving Heavenly
Father and that every Goliath can be
overcome.
.
I am impactful: what I do makes a
difference in the lives of others.
(3) Key roles: These roles take priority in
achieving my mission:
.
Husband: my partner is the most
important person in my life. Together
we contribute the fruits of harmony,
industry, charity, and thrift.
.
Father: I help my children experience
progressively greater joy in their lives.
.
Son/brother: I am frequently ‘‘there’’
for support and love.
.
Christian: God can count on me to
keep my covenants and to serve his
other children.
.
Neighbor: the love of Christ is visible
through my actions toward others.
.
Change agent: I am a catalyst for
developing high performance in large
organizations.
.
Scholar: I learn important new things
every day.
Organizational mission, vision and core
values
The visionary management process comprises
of a cycle of successive phases, which can be
distinguished into personal mission/vision
development, organizational mission/vision
development, situation analysis, strategy
formation, and planning and implementation
(Rampersad, 1997). Figure 3 shows a model
representation of this phased process. The
first step of this process has already been
described. Next, the following phases will be
discussed.
Organizational mission/vision development is
the second phase in the visionary
management process, see Figure 3. The
central questions here are: why? and where to?
Organizational mission encompasses the
identity and the core competence of the firm
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Figure 3 Visionary management process
.
.
.
.
.
and indicates its reasons for existence, for who
it exists, why it exists, what its primary goal is,
and who its most important stakeholders are
(see Figure 2). The mission is therefore not
tied to time. An effective formulated mission
creates unambiguous behavior of employees,
strengthens one-mindedness, and improves
the internal communication and the
atmosphere within the organization
(Rampersad, 1997). The following show two
effective organizational mission statements.
(1) Mission Hamilton-Wentworth Regional
Police – our mission is to serve and
protect in partnership with our
community.
(2) Mission ESSO Imperial Oil – the
company’s mission is to create
shareholder value through the
development and sale of hydrocarbon
energy and related products.
Organizational vision, on the other hand,
encompasses a long-term dream of the firm
and indicates the transformation path
necessary to accomplish this. Vision is an
image of the desired future. An effective
formulated organizational vision gives
direction to personal ambitions and creativity,
creates a climate through drastic changes,
strengthens belief in the future, and releases
energy in people. The organizational vision is,
contrary to the organizational mission, tied to
a time horizon and the related concrete goals.
Effectively formulated organizational
mission and vision statements meet the
following criteria:
.
Short, global, and abstract; it is
understandable, communicable, and
clear for everyone in the organization to
.
.
.
serve as a concrete guideline for
decisions.
Organization specific; the emphasis is on
distinctive elements with respect to other
organizations. At the same time, the
limits are widely formulated to allow
development of new initiatives.
Ambitious, challenging, motivating, and
idealistic; inspires employees and gives
direction to initiatives and creativity.
Clarifies purpose and direction and gives
meaning to the change expected of
people.
Realistic; it is recognizable to everyone.
The feasibility is not open for discussion.
Everybody in the organization is involved
in the development process; this includes
the desk clerks, waitresses, and
housekeepers.
Mission is timeless and vision is linked to
time.
Aligned with company core values and
linked to customer needs.
It includes ethical starting points and
cultural components, such as respect for
the individual, make a contribution to
society, help people to develop their
opportunities, etc.
The organizational mission and vision
together form an important management
instrument that expresses the soul of the firm
and indicates what the organization stands
for, for which purpose it exists on earth, what
its primary goal is, where it wants to go to,
how it plans to reach there (based on his/her
values), and on which important points
should everyone concentrate. They form the
collective ambition of the organization, and
have an important impact on the bond of
employees to the organization and their
performance. A successfully formulated
collective ambition shows people how their
activities contribute to the whole, whereby
they work together on the goal of the
organization, which will lead to higher
performances. As a result, they get a feeling of
pride that they are making a useful
contribution towards something that is worth
it. This only works if they believe that
management has a long-standing
commitment to it (Hamel and Prahalad,
1994). The organizational mission and vision
give direction to a firm and functions as a
compass and a road map. The convincing
propagation of an active, inspiring,
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recognizable, challenging, and fascinating
mission and vision which touch people and
create feelings of solidarity usually lead to
more effort, satisfaction, and commitment.
After all, such a common ambition inspires
creativity, motivates and mobilizes people,
gives them energy, and leads to better
performances. An organization will be
successful if it succeeds to create a sense, a
meaning that releases energy in people, raises
involvement and puts people in movement.
Mission and vision as management
instruments also offer the possibility of
creating unity in the behavior of employees, to
make employees feel proud of their
organization, to let them focus on the relevant
activities which create value for customers,
and to eliminate non-productive activities.
After all, when a person does something
which he/she finds a meaningful occupation,
than what he/she does will appeal to him/her.
This generates more ability to be dynamic,
creative, and task-oriented. An effective
organizational mission and vision also gives a
hold on decision making and helps managers
with decisions concerning the use of available
resources. In an organization without a
mission and vision, people are exposed to ad
hoc decisions and short-term changes. That is
why it is important that each individual
demonstrates belief in the organization’s
mission and ownership of its vision. The
concepts of organizational mission and vision
are further worked out in Table I.
The organizational vision is also linked to a
number of core values, in order to strengthen
the one-mindedness of the employees, and
favorably influence their behavior and the
organizational culture. By sharing these
values, a group becomes a team and a
company becomes a community. The core
values determine what approach is used to
realize the vision. They determine how we
treat each other, and how we see our clients,
personnel, the community, and our suppliers.
After all, values in an organization usually
inspire commitment, loyalty, and devotion in
all parts of the organization. It is also
recognized that the efforts and involvement of
people are usually optimal if their own
principles and that of the organization
match each other. A number of possible core
values are shown in Table II (Rampersad,
2001).
To illustrate the use of core values in real
life, an example is given in Table III from the
Life Administration Group (part of the Home
Service Division of the Prudential Assurance
Co. Ltd in the UK), whereby the organization
mission was translated to a set of easy-tounderstand core values (Oakland, 1995). The
formulation of these values forms their way of
life statements.
In practice, top management and middle
management develop the conceptual overall
organization mission, vision, objectives, and
strategies. This draft strategic policy is then
actively communicated to the other
employees through different workshops on all
levels. Brainstorming takes place in teams,
whereby each team reflects on the entire
organization. After an eventual adjustment of
the draft, it gets a formal status. This way the
employees get a better insight into the course
to be followed by the organization. After
having completed this process, each
department or unit formulates their own
specific vision, objectives, and strategies,
which are attuned to the common
organizational mission (see Figure 4). The
basic idea here is that each organizational
level should have the same mission. This way,
the message from top management is
communicated downwards in a consistent
manner. This top-down and bottom-up
strategy-forming process occurs repeatedly on
all subsequent organizational levels in
increasing details. The strategies formulated
by employees at a higher level are considered
as vision and objectives by personnel at a
lower level. Thus the how from one is the
where and what of another, or the strategies of
the higher layer of management become the
vision and objectives of the next level
down. This also implies that the vision and
goals formulated by a lower level can be seen
as a means to realize strategies by a higher
level. In this manner, the overall strategic
business plan is systemically translated into
more specific plans at each organizational
level.
Situation analysis is the following step in the
visionary management process and regards
the evaluation of the strategic position of the
organization and documentation of the
organization’s objectives (see Figure 3). In
this phase, the strengths and weaknesses of
the organization (internal) and the
opportunities and threats from the
environment (external) are first brought into
perspective. Benchmarking is an important
instrument here that is focused on improving
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own performances with respect to the leading
competitor. Next, the objectives (intended
short-term results) are determined, whereby
the what is central (see Figure 1). In this
process, all stakeholders, such as customers,
suppliers, employees, shareholders, etc.,
Table I Organizational mission/vision concept
Common
ambition
Core
Aspects
Meaning to employees
Mission
Why?
Identity and core competence
of the organization
Its reasons for existence
Its ultimate primary goal
For who does it exist
Why it’s on earth
Its most important
stakeholders
Primary goal
Stakeholders
Reasons for existence
Not tied to a time horizon
Vision
Where to?
Display of a common notion
of a desired and a feasibly
considered future situation
Formulation of the long term
ambition (strategic intent)
Notion of the transformation
path that is needed to reach
that dream
The core values that underlie
the actions of the organization
New developments
Ambitions
Future path
Core values
Tied to a time horizon.
Tied to concrete and
measurable goals
For what purpose do I work
there?
Can I identify myself with the
working methods, which are
used?
Why do we find it meaningful or
valuable that our organization
exists?
What do the employees want to
mean for each other and the
surroundings?
Which added value do they want
to deliver?
Thus: giving a meaning,
identification, and similarly
oriented
Where are we going together?
What is the desired long-term
perspective of the organization?
Is linked to the personal ambitions
of employees
Thus: giving direction to personal
ambitions and creativity, creating
an environment for drastic
changes, strengthening belief in
the future (and with that release
energy), strengthening onemindedness and unity of behavior
Table II Core values
Our organization will be guided by the following core values, which are embedded in its standards:
Integrity
We will be honest with our customers, suppliers, employees, shareholders and the
community of which we are part. What is said will also be done, an agreement is an
agreement
Customer
orientation
We will continuously listen to our customers and provide them with products/services of a
quality that they expect of us, and we will continuously satisfy them
Commitment
We will work with dedicated people and completely stand behind everything we do
Respect
We will appreciate each other, acknowledge each other, treat each other as equal, and
respect each other
Professionalism
We will continuously strive for superior performances in everything our organization
undertakes
Teamwork
We will work harmoniously together, help each other, be mutually responsible, and support
each other
Trust
Nothing is a secret
Skilled
We will continuously improve the capacities and creativity of our employees
Entrepreneurship
We will be innovative, creative and flexible, take well calculated risks, take initiatives, learn
from our mistakes, and continuously improve ourselves
Empowerment
We will be resolute and understand what responsibility and effort means, as well as
sympathize with the needs of our employees
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Table III Organizational mission and core values of Life Administration Group (Prudential Assurance Co. Ltd)
Mission
We administer Prudential Assurance life business. Our purpose is to delight our customers by delivering a quality
service, in a cost-effective manner, through the contribution of everyone
Core values
We are committed to delivering a quality service to our customers:
The customer is the reason we exist and the key consideration in carrying out our day-to-day business
The customer is the person or area to whom we are providing a service
Everyone is a vital link in the service chain and the successful partnership between the suppliers of services and
their customers is of primary importance
As individuals and teams we demonstrate our commitment to our customers by ``getting it right first time’’
We will continually review, redefine and improve the quality of service we provide to meet the changing
expectations of our customers
We recognize that our purpose can only be achieved through people:
We recognize that everyone wants to provide a quality service
Each individual has the right to know what is expected of him/her and the reasons why
We are committed to providing continuous education, training and development opportunities to enable everyone to
realize their full potential
Each individual is responsible for providing a quality service
We encourage people throughout the organization to listen actively to each other and to voice their ideas and
opinions
We are committed to creating a business-like and caring working environment:
We will communicate in an open manner, which mirrors and supports our way of life
Teamwork will play a vital part in achieving our purpose
Opportunity will be given to individuals and teams to make changes at the level where it is most practical
We actively support the local community and the wider environment in which we live and work
should be taken into consideration (see
Figure 2). The most important objectives
with regard to the different stakeholders are:
.
Customers: increasing leadership with
respect to quality and service level. A
competitive price/performance ratio.
.
Personnel: a working climate, which is
inspiring, challenging, and enjoyable.
Focused on increasing labor productivity,
improving motivation, decreasing
absenteeism due to illness, and protecting
the employee’s wellbeing. Thus, an
improved quality of labor.
.
Organizational structure: decreasing costs
and shortening throughput time based on
improved efficiency.
.
Suppliers: effective partnership relation
with suppliers in order to improve the
Figure 4 Organizational mission translated to lower organizational levels
.
.
quality, decrease the purchase costs,
increase the added value, and shorten the
delivery time.
Society: educational system, employment,
eco-conscious, and energy consumption.
Shareholders: increasing the positive cash
flow (= sales – {costs + tax}), decreasing
the cost of capital provision, a superior
return on all investments and thus, an
improved shareholder’s value.
The objectives are directly derived from the
organizational vision and form realizable
milestones, which are measured yearly. Each
vision part has one or more goals. These are
formulated at top management level as well as
on department level, in order to realize the
vision. Organizational objectives are usually
based on a business economics approach,
such as sales growth, market share,
profitability, productivity, quality, etc.
Because the intended result is reflected by a
goal, the formulation of this must be SMART;
specific, measurable, achievable, realistic, and
time-specific. Examples of SMART-goals are:
an increase of 6 per cent in the market share
of product B in South America within two
years, achieve a market growth of 6-7 per cent
for the next two years, reduce the wastepercentage from 3 per cent to 0.5 per cent
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within one year, improve delivery reliability
by 50 per cent within six months, reduce
the service call rate by 25 per cent per year
for the next three years, reduce the
throughput time from 8.5 days to one day in
ten months.
Strategy formation is the next phase in the
visionary management process (see Figure 3),
whereby alternative strategies are developed
and choices are made, based on the visible
gap between the present and desired
situation. The who is central here
(see Figure 1). Strategy indicates how the
objectives can be realized and which choices
should be made. It is the answer of the
SWOT-analysis. Do here only what you are
unique in and outsource the supporting
activities to specialists, who can do it better,
quicker, and cheaper than you can. Strategies
are linked to the objectives per stakeholder, as
is seen in Figure 2.
The organizational mission, vision,
objectives, and strategies of Oil Refinery Shell
Pernis are described in Table IV, to illustrate
the above.
The strategies should be translated into
critical success factors (CSFs). These key
factors are essential to the continuation of the
organization and thus, require constant
attention from management. They determine
the competitive advantage of the organization
because they are strongly related to its core
competencies. A CSF is that in which the
organization must be outstanding to be able
to survive, or that which is of decisive
importance to the success of the organization.
They are factors that make the organization
unique on the market. Based on this, the
organization can be guided effectively.
Examples of CSFs are: well-motivated and
skilled employees, customer orientation, high
product quality, good control of the costs,
rapidity of bringing a new product on the
market (time-to-market), efficient dealers
organization, good customer service,
complete product assortment, eco-conscious,
and availability of certain facilities. Such
factors can be critical to the success or failure
of an organization. They should be
determined through brainstorming with the
entire management team, and they should be
hierarchically arranged. Results of
benchmark-studies and inventories of
customer’s data form the most important
inputs for determining CSFs.
You can determine with the aid of a matrix,
which operational processes are relevant from
the standpoint of the CSFs. If a process is
essential, this is marked in the matrix. Table
V shows an example of this exercise. By using
this, an impression is obtained of the most
important processes that add value for the
customer. Processes that create a high added
value receive most attention and are eligible
for continuous improvement. Non-essential
processes can better be outsourced.
After the CSFs are determined,
performance indicators (PIs) are derived from
them. These measurable quantities measure the
performances of critical activities (see Figures
1 and 2). You can determine per processCSF-combination one or more PIs. A PI is a
measurable quantity of an activity, which is
related to a certain CSF and on which basis
the performance of the organization can be
evaluated. PI measures the activities that are
Table IV Organizational mission, vision, objectives and strategies of Shell Oil Refinery Pernis
In 1998, Shell Pernis has taken it upon itself to be a world class refinery: a refinery with a perfect operation that
belongs to the best in Europe and the top in the Benelux. To achieve this, plan PERFECT ’98 was launched in mid
1996 within the organization to change and attune the organization optimally to the dynamics of the market. Here,
the decentralization of the functional structure was central, whereby the activities were organized as much as
possible around the primary process, which is ``the production of oil and chemical products for shell companies’’.
The starting points of this organizational change are given below
Mission
Profitable production of oil and chemical products for Shell companies all over the world.
Vision
To achieve the mission Shell Pernis wants to be a big producer who:
1.
Is efficient, cheap, and as such competitive
2.
Worker customer-oriented and delivers the agreed-upon quality
3.
Acts safe and eco-conscious
(continued)
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Table IV
4.
Offers employees challenging work in a decisive organization
From the thought that employees eventually determine the success of the company, it is of the greatest interest
that the organization of Shell Pernis is set up in such a way that the talents of all employees are taken advantage
of. To belong to the best in the industry, everything within the company will be focused on achieving high
productivity with a motivated working community
Objectives
Shell Pernis as pacesetter in the mentioned fields, will have to comply with a number of goals. These goals are
derived from the four vision elements and are directed at the hardware as well as the software:
1.
Regarding ``efficient, cheap, and as such competitive’’:
± fixed costs within budget and decreasing yearly in real terms
± per factory, not more than three days unplanned shut downs
± working with a team that is under the manpower norm
± improving corrected energy & loss index with 1 point per year
± maintenance costs on average 25 per cent lower than in 1995
2.
Regarding ``customer oriented and delivers the agreed upon quality’’
± decreasing the number of customers complaints/claims with 25per cent per year
± all departments certified by 1997
± percentage followed through advises above 90 per cent
± 95 per cent of the assignments delivered within ``service levels’’
3.
Regarding ``safe and eco-conscious’’
± a yearly total recordable case frequency and lost time injury frequency that is 10 per cent lower than the
best results of the previous years
± absenteeism due to illness of less than 2 per cent
± a continuous reduction of the number of complaints from neighbors
± decreasing the number of environmental incidents per year with at least 25 per cent
± no litter outside the wastebaskets
4.
Regarding ``challenging work in a decisive organization’’
± at least 80 per cent of all employees find that they have challenging work
± at least 80 per cent of all employees find that they work under good management
Strategies
The vision will be realized through the following approach
1.
Regarding ``efficient, cheap, and as such competitive’’
± focus on the financial company results in the short and long run
± using energy and raw materials efficiently
± securing integrity of the installation
± attuning maintenance optimally to the desired user-goals
± benchmarking with the best in the industry
2.
Regarding ``customer oriented and delivers the agreed upon quality’’
± attuning delivery of products and services with internal and external customers, contractors and suppliers
± certifying the core activities according to ISO-norms
3.
Regarding ``safe and eco-conscious’’
± maintaining a clean and cheerful plant
± protecting the health and wellbeing of employees
± realizing that accidents and incidents can be prevented (working unsafe = shut down)
± preventing negative influences on the environment as much as possible
4.
Regarding ``challenging work in a decisive organization’’
± effective communication of the company’s goals to all employees
± result oriented actions based on personal goals and company goals
± developing employees purposiveness
± economically optimize the division between outsourcing and in-house production
± offering stable employment for those who distinguish themselves in performance and added value
± yearly communication of the agreements with shareholders and of actual results
± introduction of a 180ë personnel assessment system
± delegated responsibilities and authorities as far as possible within the organization
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Table V Matrix CSFs and operational processes
Critical success factors (CSFs)
Motivated Customer
Product
Cost
employees orientation
quality
control
Operational processes
1.
2.
3.
4.
5.
6.
7.
8.
Purchasing
1.1 Selecting suppliers
1.2 Closing purchasing contract
1.3 Placing purchasing order
1.4 Receiving goods and purchasing invoices
1.5 Paying purchasing invoices
Fabricating
2.1 Supplying
2.2 Sorting
2.3 Sawing
2.4 Drilling
2.5 Bending
2.6 Sanding
Assembling
Spraying paint
Testing
Packaging
Selling
7.1 Acquisition
7.2 Order processing
7.3 Distributing
Administration
X
X
x
x
x
X
X
X
X
X
X
X
X
X
X
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
X
x
x
x
x
X
x
x
x
x
x
x
x
x
x
x
x
x
X
Table VI Performance indicators
Criteria
Indicators
Quality
Quality grade = {(production quantity ± number of defects)/production quantity} x 100 per cent
Failure rate = (number of failures/total number of products tested) x 100 per cent
Failure rate = (number of failures/operating time ) x 100 per cent
Per cent rejects
Per cent scrap
Per cent communication failures
Number of suggestions per employee
Number of suggestions implemented
Usable strategic information as a percentage of available information
Per cent damaged
Per cent returns by customers
Per cent of processes which are statistically controlled
Per cent safety incidents
Per cent environmental incidents
Number of customers’ complaints
Number of warranty claims
Delivery reliability; per cent delivery completed, on time, and according to the specifications
Per cent of processes with real-time quality feedback
Quality costs consisting of:
1.
Internal failure costs; costs linked to correcting mistakes before delivery of the product, such
as: scrap, rejects, adjustments, downtime of equipment, labor sitting idle while waiting for
repairs, and sales discounts for inferior products
2.
External failure costs; costs which regard the adjustments of malfunctions after delivery of the
product, such as: repair costs, travel and lodging expenses, replacement costs, stock spare
parts, lost goodwill of customer, quarantee and warranty costs, and dispatchment costs
3.
Prevention costs; costs which are related to occurrence of the above mentioned costs such
as: designing the product and the related process for quality, planning the quality control
process, preventive maintenance costs, capital costs, quality training, and standard working
procedures
4.
Judgement costs; costs which have to do with measuring and evaluating products d
processes to guarantee that these meet certain standards such as: input check, laboratory
tests, acquiring special testing equipment, receiving inspection, reporting on quality, and ISOaudits
(continued)
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Hubert K. Rampersad
Table VI
Throughput
time
Throughput time = processing time + inspection time + movement time + waiting/storage time
Manufacturing cycle effectiveness = processing time/throughput time
Down time
Number of breakdowns
Availability = MTBF/MTTR
MTBF = mean time between failures
MTTR = mean time to repair
Actual processing times vs waiting times
Machine availability = {(production time-stoppage time)/production time} x 100 per cent
Throughput time of failures = dispatch time-notice time
Invoicing speed
Time between order and delivery
Time needed to present an offer
Per cent of delayed orders
Response time to a service request
Lead time for product development
Time needed to launch a new product on the market
Productivity
Productivity = output/input = result/costs
Actual productivity = actual result/actual costs
Expected productivity = expected result/expected costs
Result = output = (all produced units x sales price) + dividends
Labor productivity = result/labor costs
Labor costs = man hours x hourly
Wage capital productivity = result/capital costs
Capital costs = annuity value of used capital goods
Material productivity = result/material costs
Material costs = purchased material-storage costs
Overhead productivity = result/overhead costs
Overhead costs = energy, maintenance, insurance, etc.
Integral productivity = result/(labor costs + capital costs + material costs + overhead costs)
Effectiveness = actual result/expected result
Efficiency = expected costs/actual costs
Revenue growth
Market growth
Sales growth
Per cent of sales from new products
Per cent absence due to illness
Per cent personnel turnover
Per cent of personnel who find that they are working under good management
Per cent of personnel who find that they have challenging work
Training costs as a percentage of sales
Operational costs as a percentage of sales
Return on investment
Per cent of personnel with personal mission/vision linked to organizational mission/vision
Profitability = sales/costs + interests received
Added value
Gross added value = sales used-raw material, goods and services needed to produce these
products
net added value = gross added value-depreciation (consumption of durable capital goods)
added value per annual sales
added value per labor costs
added value per number of employees
added value per labor time
revenue per employee
purchase share as per cent of sales
circulation velocity of stock
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The TQM Magazine
Volume 13 . Number 4 . 2001 . 211±223
of crucial importance to the organization and
as such, deliver a valuable contribution to
controlling the operational processes. They
give management timely signals regarding the
efficient guidance of the organization based
on measurements of process changes and
comparisons between the measurement
results and the norms. PIs are linked to the
organizational goals through the CSFs and
the strategies (see Figures 2 and 3). To a
customer-oriented organization belong, for
example, the following PIs: number of
customer’s complaints, the speed with which
complaints are dealt with, repair time,
percentage of complete deliveries that are on
time and according to the specifications, and
the related throughput time of orders. The
PIs that are linked to a high product quality
(CSF) are for example: number of customer
complaints, percentage rejects, percentage
returns of damaged goods, number of process
interruptions, and the availability of
machines. The following PIs go with
motivated employees: percentage absence due
to illness, percentage late comers, added value
per personnel costs, and labor productivity.
Table VI displays some important
performance indicators to measure processes.
Table VII shows an example whereby per
process-CSF-combination, one or more
possible PIs are given.
Planning and implementation is the last phase
in the cycle (see Figure 3) and regards the
introduction of chosen strategies, which result
in a strategic business plan, operational
department plans, and concrete projects. In
this last phase, the chosen strategies are thus
translated into operational plans for the
Table VII Organizational process/CSFs and performance indicators (PIs) matrix
Operational
processes
Motivated
employees
Critical success factors (CSFs)
Customer
Product
orientation
quality
1. Purchasing
Cost
control
Per cent approved
materials
Purchase share as per
cent of sales
Purchase price vs
market price
Per cent absence due Number of customer
to illness
complaints
Labor productivity
Added value/
personnel costs
Training costs as
per cent of sales
Per cent rejects
Per cent waste
Effectiveness
ISO norms
Added value
Availability of
machines
Per cent failures
Efficiency
Integral productivity
Capital productivity
Material productivity
Added value/sales
Operational costs as
per cent of sales
3.1 Acquisition
Per cent sales per
sales person
Number of customer
complaints
Market shares
Market growth
Number of customer
complaints
Per cent sales from
new products
3.2 Order
processing
Order throughput
Time
Labor productivity
Turnover speeds
Settling rush orders
3.3 Distributing
Per cent absence due Per cent complete
to illnesses
deliveries, on time,
Labor productivity
and according to
specifications
Delivery speed
Per cent returns of
damaged goods
Effectiveness
Circulation speed of
stocks
Warehouse utilization
Stock levels
Availability of
transportation
systems
Capital productivity
4. Administrating
Labor productivity
Effectiveness
Billing speed
Debtors age
2. Fabricating
3. Selling
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A visionary management model
The TQM Magazine
Volume 13 . Number 4 . 2001 . 211±223
Hubert K. Rampersad
different departments or units within the
organization, after which they will be
implemented (see Figure 4). The actions to
be undertaken are worked out in the
operational plans for the different business
functions for a period of one year. It is a shortterm plan and tactically of nature. The central
question is: What must financing, HRM,
purchasing, marketing, R&D, logistics,
production, maintenance, and services do to
realize the overall organizational mission,
vision, objectives, and strategies? The
business objectives are worked out by the
different departments according to
investments, production costs, new
technologies, production capacities,
production volume, stock, supplier selection,
outsourcing, required education, etc. The use
of project management techniques is usually
necessary during this phase, as well as
creating awareness for change.
After this phase you should start again (see
Figure 3). Visionary management is not a
one-time activity, but a process of continuous
improvement. It is a never-ending journey
toward competitive advantage. There are
always other and better strategies and
improvement methods. Competition is not
standing idle.
References
Covey, S.R. (1993), The Seven Habits of Highly Effective
People, Simon & Schuster, New York, NY.
Hamel, G. and Prahalad, C.K. (1994), Competing for the
Future; Breakthrough Strategies for Seizing Control
of your Industry and Creating Markets of Tomorrow,
Harvard Business School Press, Boston, MA.
Oakland, J.S. (1995), Total Quality Management,
Butterworth Heinemann, Oxford.
Rampersad, H.K. (1997), Strategic Management: a
Visionary Approach, Kluwer Bedrijfsinformatie,
Deventer.
Rampersad H.K. (2001), Total Quality Management: an
Executive Guide to Continuous Improvemen t,
Springer Verlag, Heidelberg, January.
Senge, P.M. (1990), The Fifth Discipline: The Art &
Practice of the Learning Organization, Doubleday,
New York, NY.
Commentary
This article should really help you to think through, in a clear and thorough manner, what the vision is
within your organization and how that can be absorbed into your daily routine. The model described
can be applied to any industry area of business.
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